# PPI Shock Rocks Markets: Energy Inflation Lifts Rate Hike Bets ## What Did PPI Show? August US PPI rose 0.4% monthly versus 0.1% in July; annual inflation reached 5.4%, above the 5.3% forecast. * Goods: +1.1% * Energy: +4.2% * **Diesel: +24.1%** * Core PPI: +0.3% monthly, +4.7% annually * Intermediate goods: +11.5% annually Services rose only 0.1%, keeping pressure concentrated in goods and energy. ## Bond Market The 10-year Treasury yield reached 4.83%, the highest since November 2023. The 30-year exceeded 5.25%, while the 2-year reached 4.37%. The 10-year TIPS real yield reached 2.46%, pressuring gold. ## Rate Hike Expectations CME FedWatch now shows a 62-65% hike probability, up from ~35% in early August. Strong NFP reinforced the case; cut odds are near zero. Most Reuters-surveyed economists still expect rates unchanged through year-end. ## Ahead of CPI August CPI is due Friday at 15:30 TRT, expected at 3.4% annually and 0.4% monthly. **Hot:** Higher headline and core could push hike pricing toward 75-80%. **Mixed:** High headline but moderate core could be treated as a temporary energy shock. **Cool:** Moderate headline and core could trigger sharp upside through position unwinding. ## Asset-Class Outlook **Gold:** Down over 100 $ in three sessions; real yields pressure it. **Stocks:** Rising yields, energy costs and hike risk weaken risk appetite. **Crypto:** Bitcoin remains around 79,000 $; rising real yields remain a negative backdrop. **Oil:** Brent above 100 $, WTI around 96 $; Middle East developments remain a major risk. ## Conclusion PPI shows inflation pressure is driven mainly by energy supply. CPI is the final major data point before the September 15-16 FOMC. Markets are positioned for a hike, making a downside inflation surprise the key risk. A cool core reading could trigger sharp position unwinding; a higher core reading could deepen bond selling. $BTC $ETH